Friends in mutual funds

[olivegreen]

What do I tell friends who ask me what to do now that their mutual funds are down 30% to 40%? I told them all a year ago to get out of the stock market unless they knew what they were doing but no one really did listen and how could I blame them really? Who would have thunk we'd have ended up here? Anyway, do they stay for the long haul (10 years to retirement for most of them) now because its too late or still consider gettting out? That's my question. I feel very sad for them and wish I could help.

OG

[Jim Nickerson]

Re: Friends in mutual funds

What do I tell friends who ask me what to do now that their mutual funds are down 30% to 40%? I told them all a year ago to get out of the stock market unless they knew what they were doing but no one really did listen and how could I blame them really? Who would have thunk we'd have ended up here? Anyway, do they stay for the long haul (10 years to retirement for most of them) now because its too late or still consider gettting out? That's my question. I feel very sad for them and wish I could help.

OG

Tell them you don't know what they should do, or you could tell them what you think you'd do right now if you were they.

You might also read John Hussman's weekly note from two Sundays back at hussman.net and you might recommend it to your friends if you think it is worthwhile advice about whether or not selling out now may be good.

Hussman can of course be wrong, and presently my money with his HSGFX is getting the living shit kicked out of it, but generally he is a smart man I think. Also a permabear, Jeremy Grantham, has expressed a similar opinion to Hussman in that there are currently opportunities in here for the brave and smart. Search Grantham here in last 24 or so hours and you should come up with the link on Prieur du Plessis' site.

The alternative is this mother market may go doWN and never come up.

[phirang]

Re: Friends in mutual funds

depends on how bold your friends are... the market IS waiting, for CERTAIN, on the election, and so till then, it's a crappy time to sell out.

If you're in cash, maybe start getting some GSE paper on the assumption BRICOPEC will get flogged into buying it again(they will): that'll give you some yield w/o ridiculous downside(now that LIBOR[faked, but watev] and repo's are under control).

I'd wait till election to do ANYTHING. I'm trading options reasonably well on certain companies to make up for my 6-figure unrealized losses in mining juniors (yes, i'm a retard), but i don't recommend that unless you really a degenerate gambler like i am.

[BiscayneSunrise]

Re: Friends in mutual funds

I had been telling people to sell 10-20% of their portfolio each day on rallies.

The rallies, that is, that never came.

Now I tell them just to sell in an ordered fashion.

I agree the market is waiting for the election but at an average of 600 points a day down, how long can one wait?

[phirang]

Re: Friends in mutual funds

Why sell? Buy gold? lol... we've see how wise THAT call is.


Treasuries are overpriced... the only bargains out there are US equities and GSE paper if you believe foreign banks will pick them up.

[sadsack]

Re: Friends in mutual funds

Subject to the caution in post #3 above, if these assets are in taxable accounts, the FOOGs (Friends o' Olivegreen) might consider realizing capital losses by selling, then buying back in after the 30 day wash sale period - that is, if they prefer to remain in securities.

With oodles of capital loss carryovers, they would be well situated to offset up to $3K a year in ordinary income, as well as buffer any profits from trading PMs once POOM arrives .

This is what I'm doing (harvesting tax losses), at least for those positions which I believe to have longer term potential.

[c1ue]

Re: Friends in mutual funds

Well, I'm of the rip the bandage off approach.

2 year ago (right before I found iTulip) I started doomsaying. I said that the present situation was unsustainable, and that the eventual collapse of the real estate bubble would lead to a chain of events which would affect all segments of the US economic and financial worlds.

I put my words into practice by dumping almost all of my decade long investments in stocks in early 2007, followed by all remaining financial stocks in late 2007.

I also strongly urged several friends to NOT buy homes in 2007, to just wait 2 years.

At this point, while my actions so far have been vindicated, I'm still pointing out to those around me that my anticipated scenario still has yet to come.

That the carnage thus far is potentially only halfway to where we're going to get.

The iTulip theory thus still has lots of value.

It is not a case of closing the henhouse gate after the fox got in; half the chickens are still left.

That's what I would point out.

Paralysis due to huge recent losses should not prevent action to stop future losses.

[olivegreen]

Re: Friends in mutual funds

Thank you everyone. All wise and differing advice that I will pass on (being careful not to make it overbearing lest they come back and blame me... as per your subtle instructions Jim) Still you know, its obviously only a game for the very well versed in the rules. This is why I was telling everyone to get the hell out of the market because everybody I know aren't exactly economic brains... just regular types.

It is hard to watch the devastation people are feeling. "All that I worked for disappearing in front of my eyes," says one friend of mine today who is 59. She is a single mother and is riding it out because her investment advisor told her to... She has lost over 42% so far...

The level of courage we'll all need to ride this madness out is going to have to be of the superhuman variety. But others have done this before us and more than likely will after us.